Abstract:
Corporation tax is a key source of revenue for most governments across the globe that
enables them to provide public goods and services such as free education, subsidized
medical services and infrastructure. However, its performance in Kenya has been
below target. This is majorly attributed to the SMEs who despite contributing
significantly to the GDP are under taxed. This study was to determine factors
affecting corporation tax performance among small and medium enterprises Nairobi
central business district, Kenya. The objectives of the study were Specifically, to
determine the effect of taxpayer education on corporation tax performance among
small and medium enterprises Nairobi central business district, to establish the effect
of system automation on corporation tax performance among small and medium
enterprises Nairobi central business district, to determine effect of tax audit on
corporation tax performance among small and medium enterprises Nairobi central
business district and to establish the effect of deterrence sanctions on corporation tax
performance among small and medium enterprises Nairobi central business district.
The study was supported by three theories of taxation namely; Ability to pay theory,
Economic Deterrence Theory and Theory of Technology Acceptance. The study
adopted an explanatory research design. The target population was 3461 who are
small and medium enterprises in Nairobi central business district and Sample size of
358 respondents The primary data was collected by use of questionnaires, Regression
analysis was used to determine the significance and relationship of the variables.
Statistical tools for data analysis comprising descriptive and inferential statistics were
applied to evaluate variations in manifestations of the variables and to test the
hypotheses respectively. The findings indicated that the independent variables had a
statistically positive significant effect on corporation tax performance: taxpayer
education (β 1= 0.237, p=0.000<0.05), system automation (β 2= 0.275, p=0.000<0.05) tax
audit (β 3= 0.359, p=0.002 <0.05) and deterrence sactions (β 3= 0.281, p=0.000 <0.05)
The results concluded that taxpayer education, system automation, tax audit and
deterrence sanctions significantly affect corporation tax performance. Based on the
findings, the study recommends that KRA to pay more attention on tax audit that
would enhance corporation tax performance. Therefore, future research can be done
on other variables such as the effect of compliance cost on corporation tax compliance
among SMEs in Nairobi County Kenya.